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Speaker 1: I'm here in Chicago with John Rogers. He is the

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Speaker 1: co founder of co CEO of Aerial Investments.

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Speaker 2: John, Please to have you here, Great to be here.

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Speaker 1: Your firm started what forty one years ago, has always

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Speaker 1: sort of had this ethos of patients, of stock, selection

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Speaker 1: of value.

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Speaker 2: Where do you find that in this environment?

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Speaker 3: Well, as you know, our logo is a turtle, So

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Speaker 3: we really are patient investors and we're finding our values

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Speaker 3: in a couple of different places. And one of our

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Speaker 3: favorite areas is the healthcare area. You know, we have

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Speaker 3: a company in Vista that's a great dental manufacturer and

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Speaker 3: helps people, you know, make sure to keep their teeth healthy.

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Speaker 3: It's an extraordinary brand, a real mode around it. Other

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Speaker 3: favorite healthcare companies at Talum, they are the largest provider

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Speaker 3: actually for profit education schools for nurses, doctors, and veterinarians.

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Speaker 2: Really it's you, as you know.

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Speaker 3: There's a shortage of nurses or shorte of doctors, shortage

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Speaker 3: of vets, and tell them is extremely well positioned to

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Speaker 3: do really well less than ten times earnings, great CEO

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Speaker 3: Stephen Beard. So healthcare it has been an area for us.

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Speaker 3: Another area is just the sports related, entertainment related companies.

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Speaker 1: Well, let's talk about sports, because when you look at

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Speaker 1: the ethos of this company, the idea of patients, I

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Speaker 1: think nowhere was that more representative, at least in recent

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Speaker 1: years than your investment in Manchester United at the soccer club.

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Speaker 2: You still have a pretty sizeable stake.

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Speaker 1: In that though I know it's down from what it was,

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Speaker 1: but there are a lot of people who questioned that

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Speaker 1: investment at the time.

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Speaker 2: What gave you the confidence to stick by that?

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Speaker 3: Well, we think professional sports is a great, great place

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Speaker 3: to be in. Manchester United has one of the best

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Speaker 3: brands in the world, and more and more with the

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Speaker 3: technology and you'll be able to watch games on your

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Speaker 3: phone at a moment's notice, whatever's happening around the world.

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Speaker 3: We think Manchester United is especially well positioned because of

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Speaker 3: its strong brand. It's hard to replicate that. It would

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Speaker 3: just take forever to be able to do that. Now

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Speaker 3: the stock has not performed well. They put themselves up

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Speaker 3: for sale. They had a partial sale and so stock

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Speaker 3: was sold at thirty three. We were able to sell

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Speaker 3: a significant amount of our stock at higher prices. Now

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Speaker 3: it's drifted lower because people presume that there won't be

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Speaker 3: another sale for quite a while.

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Speaker 2: Do you think there will be a sale.

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Speaker 3: We don't think so right now. We think it'll take

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Speaker 3: a while for everything to settle down. But we know

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Speaker 3: there's real value at thirty three and the stock at

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Speaker 3: under fifteen dollars. Here recently, you're buying the stock at

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Speaker 3: a fifty percent discount to what we think the private

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Speaker 3: market value, and we know that the companies worth thirty

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Speaker 3: three dollars. So we think if your patient to your point,

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Speaker 3: you can buy today less than fifteen and five six

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Speaker 3: ten years from now be able to get full value

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Speaker 3: for it going into the future.

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Speaker 1: You mentioned other stocks in the sports and entertainment area.

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Speaker 1: You've also been involved with Madison Square Garden and I

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Speaker 1: guess probably through the spinoff you'd.

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Speaker 2: Ended up as an investor in Sphere.

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Speaker 3: Yes, yeah, I mean we love all three parts of

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Speaker 3: the sort of the Dolan empire. You know, there is

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Speaker 3: a Dolan discount which we think is overdone. We think

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Speaker 3: that's given an opportunity of investments, is or at least

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Speaker 3: a perception, the perception.

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Speaker 2: Because he's done extraordinary things.

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Speaker 3: You know, Madison Square Gardens, it is the world's greatest arena.

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Speaker 2: It's iconic.

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Speaker 1: You're saying that sitting you're in Chicago with the United

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Speaker 1: Center on the background.

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Speaker 3: But go on, well, that's true, but it's there's no

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Speaker 3: comparison to the Madison Square Garden. It is a truly special,

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Speaker 3: special place, and you know, right in the downtown in

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Speaker 3: New York City, and you know they executed a refurbishment

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Speaker 3: more than ten years ago that was done very very well.

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Speaker 2: It's exceedingly profitable.

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Speaker 3: They do own the Chicago Theater, they own you know,

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Speaker 3: the Rocket Show, the Christmas Spectacular at Radio City Music Hall.

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Speaker 3: So Madison Square Garden Entertainment, it's a great business. We

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Speaker 3: think twenty years from now will still be there people

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Speaker 3: watching concerts, watching games. Madison Square Garden Sports where you

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Speaker 3: can actually own the teams, the Knicks and the Rangers,

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Speaker 3: two iconic brands, both selling at less than fifty percent

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Speaker 3: of We think the value of those businesses. So we

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Speaker 3: look at Madison Square Garden Sports, we think you're going

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Speaker 3: to get.

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Speaker 2: If you're willing to be patient, you'll be able to

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Speaker 2: get full value over time.

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Speaker 3: And then, as you mentioned the sphere, what's the ballast

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Speaker 3: though there?

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Speaker 1: Because I mean, on one hand, when you look at

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Speaker 1: sports and what you would make from ticket sales that

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Speaker 1: can't be yet that's not enough of the business.

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Speaker 2: I mean, I know Dolan has done a good job.

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Speaker 1: I mean you mentioned it was at the Christmas Show

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Speaker 1: or something like that, where you've done a good job

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Speaker 1: with intellectual property and basically seizing or at least holding

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Speaker 1: on to the rights of certain things that I would

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Speaker 1: think would give currency.

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Speaker 2: Down the road.

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Speaker 3: Well, I think in both the businesses that I mentioned,

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Speaker 3: there are opportunities that are hidden opportunities. So Madison Square

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Speaker 3: Garden itself, one, gaming is going to be very helpful

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Speaker 3: to them as more and more people gamble, and you'll

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Speaker 3: be able to have the sports book inside the garden

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Speaker 3: like we're going to have here at the United Center.

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Speaker 3: You also, because above the garden there's a lot of

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Speaker 3: value there. Whenever they renovate pen station, we should be

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Speaker 3: really beneficiaries of that because we own the rights that

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Speaker 3: air airspace. When it comes to the sports teams themselves,

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Speaker 3: you know, it takes a long time sometimes, but television,

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Speaker 3: that's where it's really kept them generating all the cash flow.

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Speaker 3: Your seats are important, sponsorships are important, naming rights are important,

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Speaker 3: but what the major networks pay and now the streamers

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Speaker 3: are paying for that sports content because people want to

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Speaker 3: see live sports, and it's the one thing you don't

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Speaker 3: record and watch later, You watch it live.

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Speaker 2: Absolutely, so it's so valuable.

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Speaker 1: What's the future of that though, because the demand is

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Speaker 1: certainly there, but the mechanism for delivering that, as you know,

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Speaker 1: has become a lot more fracture.

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Speaker 2: I mean, what is the future of television?

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Speaker 1: Last time I checked, Aerial still had an investment in Paramount,

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Speaker 1: which is obviously going through a lot right now trying

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Speaker 1: to figure out what its feature is going to be.

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Speaker 3: We understand there are a lot of challenges with linear television,

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Speaker 3: and the traditional bundle has of course completely fallen apart,

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Speaker 3: but we still.

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Speaker 2: Think that some of the redstone is right. The content

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Speaker 2: is king.

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Speaker 3: So if you're a Paramount Global and you own the

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Speaker 3: rights to CSI and The Godfather, Mission Impossible, and you've

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Speaker 3: got the NFL and the super Bowl and the Grammys

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Speaker 3: and all these ordinary brands that are there, all the

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Speaker 3: active you know, sixty Minutes and CBS Sunday Morning and

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Speaker 3: all the different things that you can watch, we think

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Speaker 3: that content will be valuable. However you end up getting it,

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Speaker 3: whether it's through streaming, whether it's on your phone, it's

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Speaker 3: streamed onto your phone, you're going to be in a great,

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Speaker 3: great position. So we think content will still win out,

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Speaker 3: whether it's sports or entertainment, whatever types of content that's there.

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Speaker 3: And we think Paramount Global has the best content.

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Speaker 1: Okay, and they have the management to actually execute on

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Speaker 1: that vision, the idea.

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Speaker 2: They have the great content. But as you know, it's

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Speaker 2: been an underperforming.

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Speaker 1: Stock primarily because it is still very fractured, and who knows,

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Speaker 1: maybe you end up with new management. When Sherry Redstone

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Speaker 1: finds a buyer, how confident are you that she can

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Speaker 1: pull that off.

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Speaker 3: Well, we think that Bob Beckis has done an excellent

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Speaker 3: job under an enormous amount of pressure. You know, he

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Speaker 3: used to run Europe and he's great and understand the

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Speaker 3: international values there. I think Sherry is going to do

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Speaker 3: it's right for shareholders and understands that's right for her family.

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Speaker 3: If you're going to sell that company for its maximum value,

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Speaker 3: you're just not going to sell the parts of she owns,

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Speaker 3: but you're going to want to sell the entire enterprise

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Speaker 3: where you'll get the synergies and the benefits.

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Speaker 2: And there are so many.

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Speaker 3: Large technology companies as well as traditional media companies. It

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Speaker 3: would be natural to want to buy Paramount Global and

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Speaker 3: you can get it for such a we think it's

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Speaker 3: really selling it a significant undervaluation here, and there's so

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Speaker 3: much negativity around it.

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Speaker 2: Everyone hates it.

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Speaker 3: And you remember the great John Templeton always to say

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Speaker 3: you want to buy when there's maximum pessimism.

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Speaker 2: Clearly in broadcast television.

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Speaker 3: Now there's a maximum amount of pessimism, which we think

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Speaker 3: creates opportunity as a value investor, as a contraining investor.

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Speaker 2: You know, we love this.

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Speaker 1: Do you see a future of I guess, traditional linear

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Speaker 1: TV or do you think all of this is going

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Speaker 1: to migrate to a more streaming, sort of edgreen type

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Speaker 1: of format.

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Speaker 3: I think eventually over the next couple of decades it'll

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Speaker 3: get moved over to a streaming But the nice thing again,

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Speaker 3: there can be all kinds of creative ways that you'll

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Speaker 3: be able to access content, you know, on your iPad,

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Speaker 3: on your computer, on your phone, and there'll be ways

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Speaker 3: to be able to sell advertising in all kinds of

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Speaker 3: different types of ways, and they'd be able to just.

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Speaker 2: Get what you need when you want it.

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Speaker 3: I think ultimately it's gonna if you have the right

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Speaker 3: content and be monetized in a very profitable way.

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Speaker 2: I think that's really important.

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Speaker 1: Do you or your folks that do you talk to

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Speaker 1: the board and the management at paramount from time to time.

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Speaker 1: You have a pretty sizeable state for four and a

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Speaker 1: half percent. I think as of the end of last year.

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Speaker 3: I'm not exactly sure the percentage that we own now,

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Speaker 3: but we've actually been buying stock as it was getting

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Speaker 3: making new loans. The last few weeks. I saw that,

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Speaker 3: you know, seeing that we think there are argance there.

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Speaker 3: We've happened to know. We've had a couple of meetings

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Speaker 3: of management in the last several months that have given

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Speaker 3: us confidence that they are on top of their game.

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Speaker 3: We've talked to board members and others and trying to

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Speaker 3: make sure that they're going to be doing much right

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Speaker 3: for shareholders, and have convinced come back convinced that they

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Speaker 3: understand they have a responsibility to all shareholders, not just Shrry.

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Speaker 3: And I think that's something that maybe it's not well

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Speaker 3: understood on the street, that people think there could be

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Speaker 3: a deal that would be Shary friendly and not be

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Speaker 3: friendly for everyone else. But as I talked to them,

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Speaker 3: my friends like Mario Gabelli and others. You know, we

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Speaker 3: have confidence that the management and the company would do

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Speaker 3: the right thing for shareholder with the strategy.

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Speaker 2: Though, do you guys take it aerial?

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Speaker 1: Is it more advantageous for say, to be on that

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Speaker 1: board or with your current situation where you just have

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Speaker 1: a sizeable stake. Assume given the stake, they'll take your

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Speaker 1: call any day.

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Speaker 2: When we have.

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Speaker 3: Size, we always have taken sizable stakes as a small

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Speaker 3: mid sized value specialists. We would never go on a

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Speaker 3: board of a company that we own stock in an areel.

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Speaker 3: It would really tie your hands and they will move

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Speaker 3: in and out when you need to be. But we

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Speaker 3: try to act like an independent shareholder would or independent director,

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Speaker 3: would you know, giving management our best thinking and not

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Speaker 3: in a confrontational way, but in a collaborative and constructive way.

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Speaker 3: If you thought of this, if you thought of that,

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Speaker 3: here are things we're here and here things that we

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Speaker 3: think can be helpful to you. So we want to

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Speaker 3: be a part of that management team's advice giving teammates.

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Speaker 1: It's interesting to look through the holdings at area because

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Speaker 1: you do get some real insight into not just the

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Speaker 1: strategy you need those, but where you maybe see the

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Speaker 1: buck going.

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Speaker 2: I thought it was interesting.

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Speaker 1: One of your largest holdings right now is a Jones

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Speaker 1: langlesstyle JLL, a big commercial real estate company. At a

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Speaker 1: time where commercial real estate is really hurting.

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Speaker 2: It has been a very difficult times.

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Speaker 3: We know all of our offices, you know, so many

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Speaker 3: offices now people are going three four times a week.

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Speaker 2: It's just not like it used to be.

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Speaker 3: But JLL is diversified dramatically, so they're not only just

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Speaker 3: doing leasing, they're doing sales. They outsource real estate for

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Speaker 3: large corporations, will take care of all their real estate needs.

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Speaker 2: And they're global. So people maybe are.

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Speaker 3: Not back in downtown America everywhere, but that's not to

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Speaker 3: say that over in Europe that people aren't back, or

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Speaker 3: over in Asia people are not back. And the fact

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Speaker 3: that JLL has become a global enterprise, we think it's

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Speaker 3: really helped to balance out the risks and challenges that

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Speaker 3: have happened here because of COVID.

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Speaker 1: So can that for other companies out there in the

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Speaker 1: commercial real estate space. Can that diversification that you see

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Speaker 1: at JLL, could that be the model that maybe help

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Speaker 1: some of these companies Whether this storm, well, I think the.

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Speaker 2: Big guys are the ones that will be able to

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Speaker 2: wather the storm. Are the best.

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Speaker 3: You know, CBRE compete with JLL. They are the two

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Speaker 3: largest by far. There are a couple of others that

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Speaker 3: are you know, have scale, but the vast majority there

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Speaker 3: are locally focused. It will be hard for them to

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Speaker 3: be able to have the kind of international benefits that

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Speaker 3: a JL or a CBRE has.

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Speaker 1: How do you feel though, when you look at the

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Speaker 1: current economic environment and this idea that giving it interest

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Speaker 1: rates which may have contributed to some of the pain

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Speaker 1: we're seeing in the office space. Obviously the pandemic is

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Speaker 1: largely to blame. But if interest rates remain high, as

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Speaker 1: a lot of people think they are going to remain,

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Speaker 1: is there not going to really be that lifeline for

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Speaker 1: maybe some of those legacy buildings and those second tier

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Speaker 1: buildings that are facing a refinancing coming up.

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Speaker 3: Well, I think we're getting used to interest rates where

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Speaker 3: they are now. You know, they're not dramatically high on

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Speaker 3: historic basis. They just look high because they came from zero,

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Speaker 3: you know, up to where they are today. So we

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Speaker 3: think where we are now is not bad, and we

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Speaker 3: think companies in real estate and other business will be

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Speaker 3: able to learn to make do because we get used

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Speaker 3: to where rates are.

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Speaker 2: But also we think the Feds on top of their game.

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Speaker 3: Now you know, they were late to the party, you know,

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Speaker 3: but now they're doing the right things. Inflation's back under control,

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Speaker 3: interest rates will go lower, and so we think real

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Speaker 3: estate will be a place where you're going to be

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Speaker 3: able to benefit.

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Speaker 2: You know, people I think have.

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Speaker 3: Gotten too pessimistic, too gloomy around the real estate and

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Speaker 3: often again because they're looking just around their own neighborhoods.

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Speaker 3: But it is different. Norm only is it's different around

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Speaker 3: the globe. It's often different. It's also different in small towns,

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Speaker 3: you know, Peoria or Rockford or whatever it is, versus

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Speaker 3: Chicago or New York or LA. And we have to

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Speaker 3: take that into account for these significant real estate companies.

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Speaker 1: I mean, I know that historically interest rates aren't terribly high,

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Speaker 1: but obviously there's a whole generation of folks that really

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Speaker 1: only knew basically zero one percent interest rates. And this

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Speaker 1: gets to a broader question though, what do you plan

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Speaker 1: for longer term right now that we have to get

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Speaker 1: comfortable with five percent or five and a half wherever

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Speaker 1: the Fed takes us, or do we start to look

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Speaker 1: longer term to an interest rate environment that could go

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Speaker 1: back down, may not necessarily back down to zero one percent,

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Speaker 1: but something significantly below where we are right now.

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Speaker 3: I think something significantly below where we are right now,

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Speaker 3: and that gives us a lot of optimism. And real

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Speaker 3: estate related companies, some of our favorites, whether there's Leslie's

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Speaker 3: Pools or Residio or ADT companies that are supplying products

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Speaker 3: and whether you're building a new home or just expanding

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Speaker 3: in older home, these buildings related products, these home related products,

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Speaker 3: we think will do.

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Speaker 2: Quite quite well.

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Speaker 1: So you're relatively confident in the job that Jaypole is

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Speaker 1: doing right now. The economic conditions, this soft landing, this

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Speaker 1: Goldilock scenario that the market at least seems to think

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Speaker 1: we have. Do you think that I guess Jpow delivered

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Speaker 1: that Arizona's way to delivering that soft landing.

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Speaker 3: I think j Powell and the Fed have done an

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Speaker 3: excellent job getting back on track once they realized that

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Speaker 3: inflation wasn't transitory and they had to get serious about it.

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Speaker 3: I think they're doing all the right things, and I

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Speaker 3: have a lot of confidence that a year from now,

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Speaker 3: Rache will be significantly higher.

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Speaker 2: We haven't gone into a recession.

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Speaker 3: We've really been able to balance everything in a very

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Speaker 3: very effective way.

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Speaker 1: And are you confident that, say, within a year from now,

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Speaker 1: the US will still be a better place to invest

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Speaker 1: in overseas.

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Speaker 3: I'm very bullish on America, you know, as warm Buffler

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Speaker 3: always says, we have the greatest system in the world.

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Speaker 1: And all right, John, always great to talk to you.

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Speaker 1: John Rodgers, of course the co founder of Aerial Investments,